Styrene inventory decreases, cash flow improves

Since late April, various provinces in China have rolled out extensive plans for equipment renewal and consumer product replacements, buoyed by policy subsidies aimed at boosting domestic demand. These initiatives have particularly spurred new purchases and replacements in the home appliances and automotive sectors, creating a favorable market environment for styrene, which has seen an upward trend in futures. Styrene prices have climbed from a post-New Year low of 8,350yuan/mt to the current rate of 9,640yuan/mt, with port inventories decreasing and industry cash flow showing signs of recovery.

Despite the financial struggles post-Spring Festival, where the industry experienced historically high losses, there has been a gradual recovery to a current loss of 300yuan/mt Some facilities have managed to approach a breakeven point through integrated production strategies and the comprehensive utilization of hydrogen sources. However, this improvement in cash flow has not yet led to an increased operational load at styrene facilities. For instance, Lianyungang Petrochemical's 600kt/year unit remains shut down, Lihuayi's 720kt/year styrene unit has been halted for maintenance since April 18, and the load at ZPC's four styrene units remains low, leading to a constrained supply. Nevertheless, market expectations suggest that a continued recovery in cash flow may soon reflect positively on supply levels.

Downstream, the situation has been gradually improving since the Spring Festival. Industries such as ABS and PS are narrowing their losses. Some ABS factories have indicated that balanced cash flow can be achieved through comprehensive energy consumption control. Despite this, continuous production losses have dampened the motivation to increase production, maintaining low inventory levels for both upstream styrene and downstream products.

Styrene monomer tank inventory in East China main ports decreased by 13kt to 104.2kt on Apr 24, 2024. Commercial inventory, known as the inventory held by traders, was 67.8kt.

Internationally, facility failures have kept the arbitrage window open between Europe, America, and Asia, leading to significant styrene export transactions from China from March to May. Notably, import-export data from March reveals that China's styrene imports dropped to zero for the first time. However, with the gradual resumption of operations at facilities like Total's 600kt/year unit in France and maintenance completions at AMS and LyondellBasell in early May, the tight supply-demand situation overseas is expected to relax, potentially impacting China's export market for styrene. After June, styrene port inventories are anticipated to return to low levels, potentially fueling market speculation on price differentials.

In conclusion, the entire styrene sector, from production to downstream applications, is in a cautious phase with low production enthusiasm, even as de-stocking at ports continues. With the policy-driven stimulation of end-user demand, the supply-demand balance is in a phase of recovery, likely leading to a short-term trend of simultaneous increases in both volume and price.